People Management - Use it or lose it

16 Nov 2011

This article first featured on People Management Online on 15 November 2011

Use it or lose it!

Should employees on long term sick leave be entitled to paid holiday which they have not requested? No, according to the Employment Appeal Tribunal in Fraser v Southwest London St George’s Mental Health Trust.

Although employers will welcome the EAT’s “use it or lose it” approach, this case is unlikely to be the last word on the often complex overlap between holiday and sick leave.

Fraser comes on the back of two judgments from the European Court of Justice in the cases of Stringer v HM Revenue & Customs Commissioners and Pereda v Madrid Movilidad SA. Stinger confirmed that statutory holiday entitlement continues to accrue and can be taken during sick leave. Pereda added that an employee who falls sick during a period of previously booked holiday can take the time as sick leave rather than as holiday.

Taking these cases into account, the EAT in Fraser found that an employee who had not asked her employer to take holiday during two years’ sick leave had lost her entitlement for paid holiday for the period. The EAT acknowledged that requiring an employee on sick leave to ask for holiday seems artificial. However, this is no more artificial than a period of sick leave counting as holiday in the first place.

The EAT felt its finding was consistent with Pereda, which found that although an employee can choose to take holiday during or following sick leave, it was for the employee to ask for this.

For employers, Fraser therefore provides greater clarity as to when an employee on long term sick leave will be entitled to paid holiday. It may also be a useful case to justify not making costly backdated payments for unused holiday to employees who have had multiple years of sickness absence.

However, any clarity the case provides should be measured against the numerous inconsistent judgments in relation to holiday and sick leave. Fraser itself found two of the EAT’s previous judgments to be wrongly decided and failed to mention a third inconsistent judgment earlier this year.

Employers will also be wary of the EAT’s concluding remarks in Fraser, which suggest that an employee on long term sick leave should be allowed to carry over holiday to subsequent holiday years so long as they remember to ask to do so. As a result, Fraser may turn out to be no more than a technical argument for employers not to make backdated holiday payments to employees who lack the benefit of legal advice or the foresight to provide notice of their intentions.

The point is due to be reconsidered by the Court of Appeal. It is hoped this will provide employers with greater certainty.